Well, that's how I started out by using IB's internal viewers. But it only showed broken link images for all jpg's. Gif's and png's showed just fine. So I looked at the Ibrowse folder and looked around until I found the components for the internal viewer (don't remember where they were now) but all were listed except for jpg. So I assumed it had something to do with the recent flurry over the jpg standard that it was not also included. That's why I switched it to external viewer, and pointed it to the jpg datatype in my devs folder. But that still didn't work.
IBrowse 2.3 does have an external JPEG decoder. In the codecs directory, you should find the following files:
gif.codec
imagedecode.module
jpeg.codec
png.codec
xbm.codec
The external viewers aren't intended for rendering of inline elements.